Skip to main content
SpringerLink
Log in

Do international investment contribute to environmental pollution? Evidence from 20 African countries

  • Review Article
  • Published:
Environmental Science and Pollution Research Aims and scope Submit manuscript

Abstract

International investment is needed in every economy, and every economy is expected to grow and attract investment. Despite the need of the above in every country, the dilemma is whether it has something to do with the environment. Hence the study into the impact of FDI on environment takes into consideration twenty African countries from 1995 to 2016. The study utilized Pesaran (2015) LM test, Pesaran (2007) CD, and Breusch and Pagan (1980) LM test as well as Pesaran (2007) and Im et al. (2003) panel root unit test, Westerlund (2007) test, Driscoll-Kraay OLS, average mean group (AMG), fully modified least square (FM-OLS), and the quantile regression (QR). The study indicated that foreign direct investment favorably impact ecological sustainability in the long run. The study found bi-directional link between income and CO2 pollution. Clean energy and urbanization were found to have negative impact on the economy, while fossil fuel had positive impact on the economy. Both clean energy and urbanization were found to have bi-directional relationship with CO2 pollution, but fossil fuel has uni-directional relationship with pollution. The study prompted a lot of policy recommendation such as in the interest of reducing ecological harm; these countries’ authorities could enforce the laws in the form of protecting ecology policies when dealing with international investment.

This is a preview of subscription content, log in via an institution to check access.

Access this article

Log in via an institution

Price excludes VAT (USA)
Tax calculation will be finalised during checkout.

Instant access to the full article PDF.

Institutional subscriptions

Similar content being viewed by others

References

  • Acar S, Tekce M (2014) Economic development and industrial pollution in the Mediterranean region: a panel data analysis. Topics in Middle Eastern and African Economies 16(1):65–95

  • Adedoyin FF, Bein MA, Gyamfi BA, Bekun FV (2021) Does agricultural development induce environmental pollution in E7? A myth or reality. Environ Sci Pollut Res:1–12

  • Adewuyi AO, Awodumi OB (2017) Biomass energy consumption, economic growth and carbon emissions: fresh evidence from West Africa using a simultaneous equation model. Energy 119:453–471

    Article  Google Scholar 

  • Albornoz F, Cole MA, Elliott RJ, Ercolani MG (2009) In search of environmental spillovers. World Econ 32(1):136–163

    Article  Google Scholar 

  • Al-Mulali U, Ozturk I (2015) The effect of energy consumption, urbanization, trade openness, industrial output, and the political stability on the environmental degradation in the MENA (Middle East and North African) region. Energy 84:382–389

    Article  Google Scholar 

  • Al-Mulali U, Tang FC (2013) Investigating the validity of pollution haven hypothesis in the gulf cooperation council (GCC) countries. Energy Policy 60:813–819. https://doi.org/10.1016/j.enpol.2013.05.055

    Article  Google Scholar 

  • Amegah AK, Agyei-Mensah S (2017) Urban air pollution in Sub-Saharan Africa: Time for action. Environ Pollut 220:738–743

  • Asiedu BA, Hassan AA, Bein MA (2020) Renewable energy, non-renewable energy, and economic growth: evidence from 26 European countries. Environ Sci Pollut Res:1–10

  • Asiedu BA, Gyamfi BA, Oteng E (2021) How do trade and economic growth impact environmental degradation? New evidence and policy implications from the ARDL approach. Environ Sci Pollut Res. https://doi.org/10.1007/s11356-021-13739-3

  • Bauer GR, Scheim AI (2019) Advancing quantitative intersectionality research methods: Intracategorical and intercategorical approaches to shared and differential constructs. Soc Sci Med 226:260–262

  • Bekun FV, Gyamfi BA (2020) Rethinking the nexus between pollutant emission, financial development, renewable energy consumption and economic growth in G7 countries. Social, Human and Administrative Sciences-II, 73

  • Bekun FV, Alola AA, Gyamfi BA, Yaw SS (2021) The relevance of EKC hypothesis in energy intensity real-output trade-off for sustainable environment in EU-27. Environ Sci Pollut Res:1–12

  • Binder M, Coad A (2011) From Average Joe's happiness to Miserable Jane and Cheerful John: using quantile regressions to analyze the full subjective well-being distribution. J Econ Behav Organ 79(3):275–290

    Article  Google Scholar 

  • Bokpin GA (2017) Foreign direct investment and environmental sustainability in Africa: the role of institutions and governance. Res Int Bus Financ 39:239–247

    Article  Google Scholar 

  • Breusch TS, Pagan AR (1980) The Lagrange multiplier test and its applications to model specification in econometrics. Rev Econ Stud 47(1):239–253

    Article  Google Scholar 

  • Chandran VGR, Tang CF (2013) The impacts of transport energy consumption, foreign direct investment and income on CO2 emissions in ASEAN-5 economies. Renew Sustain Energy Rev 24:445–453

  • Destek MA, Sarkodie SA (2019) Investigation of environmental Kuznets curve for ecological footprint: the role of energy and financial development. Sci Total Environ 650:2483–2489

    Article  CAS  Google Scholar 

  • Destek MA, Sinha A (2020) Renewable, non-renewable energy consumption, economic growth, trade openness and ecological footprint: evidence from organisation for economic Co-operation and development countries. J Clean Prod 242:118537

    Article  Google Scholar 

  • Dogan E, Seker F, Bulbul S (2017) Investigating the impacts of energy consumption, real GDP, tourism and trade on CO2 emissions by accounting for cross-sectional dependence: a panel study of OECD countries. Curr Issue Tour 20(16):1701–1719

    Article  Google Scholar 

  • Domac J, Richards K, Risovic S (2005) Socio-economic drivers in implementing bioenergy projects. Biomass Bioenergy 28(2):97–106

    Article  Google Scholar 

  • Dong K, Sun R, Hochman G (2017) Do natural gas and renewable energy consumption lead to less CO2 emission? Empirical evidence from a panel of BRICS countries. Energy 141:1466–1478

    Article  Google Scholar 

  • Driscoll JC, Kraay AC (1998) Consistent covariance matrix estimation with spatially dependent panel data. Rev Econ Stat 80(4):549–560

    Article  Google Scholar 

  • Eberhardt M, Bond S (2009) Cross-section dependence in nonstationary panel models: a novel estimator

  • Grossman GM, Krueger AB (1991) Environmental impacts of a North American Free Trade Agreement (NBER Working Paper 3914). National Bureau of Economic Research, Cambridge MA

  • Gyamfi BA, Bein MA, Bekun FV (2020a) Investigating the nexus between hydroelectricity energy, renewable energy, non-renewable energy consumption on output: evidence from E7 countries. Environ Sci Pollut Res Int 27:25327–25339

    Article  Google Scholar 

  • Gyamfi BA, Bein MA, Ozturk I, Bekun FV (2020b) The moderating role of employment in an environmental Kuznets curve framework revisited in G7 countries. Indones J Sustainability Account Manag 4(2)

  • Gyamfi BA, Adedoyin FF, Bein MA, Bekun FV, Agozie DQ (2021c) The anthropogenic consequences of energy consumption in E7 economies: juxtaposing roles of renewable, coal, nuclear, oil and gas energy: evidence from panel quantile method. J Clean Prod 295:126373

    Article  Google Scholar 

  • Gyamfi BA, Adedoyin FF, Bein MA, Bekun FV (2021d) Environmental implications of N-shaped environmental Kuznets curve for E7 countries. Environ Sci Pollut Res:1–11

  • Gyamfi BA, Ozturk I, Bein MA, Bekun FV (2021e) An investigation into the anthropogenic effect of biomass energy utilization and economic sustainability on environmental degradation in E7 economies. Biofuels Bioprod Biorefin 15:840–851. https://doi.org/10.1002/bbb.2206

    Article  CAS  Google Scholar 

  • Gyamfi BA, Sarpong SY, Bein MA (2021f) The contribution of the anthropogenic impact of biomass utilization on ecological degradation: revisiting the G7 economies. Environ Sci Pollut Res 28(9):11016–11029

    Article  CAS  Google Scholar 

  • Halliru AM, Loganathan N, Golam Hassan AA (2020) Does FDI and economic growth harm environment? Evidence from selected West African countries. Transnational Corporations Review:1–15

  • Hanif I, Raza SMF, Gago-de-Santos P, Abbas Q (2019) Fossils fuels, foreign direct investment, and economic growth have triggered CO2 emissions in emerging Asian economies: some empirical evidence. Energy 171:493–501. https://doi.org/10.1016/j.energy.2019.01.011

    Article  Google Scholar 

  • Hao Y, Liu YM (2016) The influential factors of urban PM2. 5 concentrations in China: a spatial econometric analysis. J Clean Prod 112:1443–1453

    Article  CAS  Google Scholar 

  • Hao LN, Umar M, Khan Z, Ali W (2021) Green growth and low carbon emission in G7 countries: how critical the network of environmental taxes, renewable energy and human capital is? Sci Total Environ 752:141853

    Article  CAS  Google Scholar 

  • Im KS, Pesaran MH, Shin Y (2003) Testing for unit roots in heterogeneous panels. J Econom 115(1):53–74

  • Jamil F, Abid M, Haq I, Khan AQ, Iqbal M (2016) Fault diagnosis of Pakistan Research Reactor-2 with data-driven techniques. Ann Nucl Energy 90:433–440

  • Jia X, Klemeš JJ, Varbanov PS, Wan Alwi SR (2019) Analyzing the energy consumption, GHG emission, and cost of seawater desalination in China. Energies 12(3):463

    Article  CAS  Google Scholar 

  • Kapetanios G, Pesaran MH, Yamagata T (2011) Panels with non-stationary multifactor error structures. J Econ 160(2):326–348

    Article  Google Scholar 

  • Koenker R, Bassett G Jr (1978) Regression quantiles. Econometrica: journal of the Econometric Society 46:33–50

    Article  Google Scholar 

  • Lau LS, Choong CK, Eng YK (2014) Investigation of the environmental Kuznets curve for carbon emissions in Malaysia: do foreign direct investment and trade matter? Energy Policy 68:490–497

    Article  Google Scholar 

  • Maryam J, Mittal A (2020) Foreign direct investment into BRICS: an empirical analysis. Transnational Corporations Review 12(1):1–9

    Article  Google Scholar 

  • Neequaye NA, Oladi R (2015) Environment, growth, and FDI revisited. Int Rev Econ Financ 39:47–56

    Article  Google Scholar 

  • Omri A, Nguyen DK, Rault C (2014) Causal interactions between CO2 emissions, FDI, and economic growth: evidence from dynamic simultaneous-equation models. Econ Model 42:382–389

    Article  Google Scholar 

  • Owusu PA, Asumadu-Sarkodie S, Dubey S (2016) A review of renewable energy sources, sustainability issues and climate change mitigation. Cogent Engineering 3(1):1167990

  • Ozcan B, Apergis N, Shahbaz M (2018) A revisit of the environmental Kuznets curve hypothesis for Turkey: new evidence from bootstrap rolling window causality. Environ Sci Pollut Res 25(32):32381–32394

    Article  Google Scholar 

  • Ozcan B, Tzeremes PG, Tzeremes NG (2020) Energy consumption, economic growth and environmental degradation in OECD countries. Econ Model 84:203–213

    Article  Google Scholar 

  • Pedroni P (2004) Panel cointegration: asymptotic and finite sample properties of pooled time series tests with an application to the PPP hypothesis. Economet Theor:597–625

  • Pesaran MH (2006) Estimation and inference in large heterogeneous panels with a multifactor error structure. Econometrica 74(4):967–1012

    Article  Google Scholar 

  • Pesaran MH (2007) A simple panel unit root test in the presence of cross-section dependence. J Appl Econ 22(2):265–312

    Article  Google Scholar 

  • Pesaran MH (2015) Testing weak cross-sectional dependence in large panels. Econ Rev 34(6–10):1089–1117

    Article  Google Scholar 

  • Pontarollo N, Muñoz RM (2020) Land consumption and income in Ecuador: A case of an inverted environmental Kuznets curve. Ecol Indic 108:105699

    Article  Google Scholar 

  • Powell JL (1984) Least absolute deviations estimation for the censored regression model. J Econ 25(3):303–325

    Article  Google Scholar 

  • Ren S, Yuan B, Ma X, Chen X (2014) International trade, FDI (foreign direct investment) and embodied CO2 emissions: a case study of Chinas industrial sectors. China Econ Rev 28:123–134

    Article  Google Scholar 

  • Ross AG (2019) Governance infrastructure and FDI flows in developing countries. Transnational Corporations Review 11(2):109–119

    Article  Google Scholar 

  • Sinha A, Driha OM, Balsalobre-Lorente D, Cantos-Cantos JM (2020) Impact of energy use segregation on carbon emissions: The role of FDI in net importing and net exporting countries. In Econometrics of green energy handbook (pp. 1-30). Springer, Cham

  • Sarkodie SA, Strezov V (2019) Effect of foreign direct investments, economic development and energy consumption on greenhouse gas emissions in developing countries. Sci Total Environ 646:862–871

    Article  CAS  Google Scholar 

  • Sarpong SY, Bein MA (2020) The relationship between good governance and CO 2 emissions in oil-and non-oil-producing countries: a dynamic panel study of sub-Saharan Africa. Environ Sci Pollut Res 27(17):21986–22003

    Article  CAS  Google Scholar 

  • Sarpong SY, Bein MA, Gyamfi BA, Sarkodie SA (2020) The impact of tourism arrivals, tourism receipts and renewable energy consumption on quality of life: a panel study of Southern African region. Heliyon 6(11):e05351

    Article  Google Scholar 

  • Sebri M, Ben-Salha O (2014) On the causal dynamics between economic growth, renewable energy consumption, CO2 emissions and trade openness: fresh evidence from BRICS countries. Renew Sust Energ Rev 39:14–23

    Article  Google Scholar 

  • Shahbaz M, Sinha A (2019) Environmental Kuznets curve for CO2 emissions: a literature survey. J Econ Stud 46:106–168

    Article  Google Scholar 

  • Shahbaz M, Nasir MA, Roubaud D (2018) Environmental degradation in France: the effects of FDI, financial development, and energy innovations. Energy Econ 74:843–857

  • Shahbaz M, Balsalobre-Lorente D, Sinha A (2019) Foreign direct Investment–CO2 emissions nexus in Middle East and North African countries: importance of biomass energy consumption. J Clean Prod 217:603–614

    Article  Google Scholar 

  • Solarin SA, Al-Mulali U, Musah I, Ozturk I (2017) Investigating the pollution haven hypothesis in Ghana: an empirical investigation. Energy 124:706–719

  • Su C-W, Khan K, Tao R, Umar M (2020) A review of resource curse burden on inflation in Venezuela. Energy 204:117925. https://doi.org/10.1016/j.energy.2020.117925

    Article  Google Scholar 

  • Tang CF, Tan BW (2015) The impact of energy consumption, income and foreign direct investment on carbon dioxide emissions in Vietnam. Energy 79:447–454

    Article  Google Scholar 

  • Thao DP (2018) An empirical investigation of the environmental Kuznets curves from an international economics perspective: does the origin of FDI matters. J East Asian Stud 16:71–91

    Google Scholar 

  • To AH, Ha DTT, Nguyen HM, Vo DH (2019) The impact of foreign direct investment on environment degradation: Evidence from emerging markets in Asia. Int J Environ Res Public Health 16(9):1636

    Article  CAS  Google Scholar 

  • Udemba EN, Güngör H, Bekun FV (2019) Environmental implication of offshore economic activities in Indonesia: a dual analyses of cointegration and causality. Environ Sci Pollut Res 26(31):32460–32475

  • Udemba EN, Agha CO (2020) Abatement of pollutant emissions in Nigeria: a task before multinational corporations. Environ Sci Pollut Res:1–11

  • WA WE (2018) Influencing factors mitigate Middle East tourist travelling to Malaysia: the quantile estimates. J Int Stud 11(3)

  • Wang Y, Li L, Kubota J, Han R, Zhu X, Lu G (2016) Does urbanization lead to more carbon emission? Evidence from a panel of BRICS countries. Appl Energy 168:375–380

    Article  Google Scholar 

  • Wang Q, Su M, Li R (2018) Toward to economic growth without emission growth: the role of urbanization and industrialization in China and India. J Clean Prod 205:499–511

    Article  Google Scholar 

  • Waqih MAI, Bhutto NA, Ghumro NH, Kumar S, Salam MA (2019a) Rising environmental degradation and impact of foreign direct investment: an empirical evidence from SAARC region. J Environ Manag 243:472–480. https://doi.org/10.1016/j.jenvman.2019.05.001

    Article  Google Scholar 

  • Waqih MAU, Bhutto NA, Ghumro NH, Kumar S, Salam MA (2019b) Rising environmental degradation and impact of foreign direct investment: an empirical evidence from SAARC region. J Environ Manag 243:472–480

    Article  Google Scholar 

  • Westerlund J (2007) Testing for error correction in panel data. Oxf Bull Econ Stat 69(6):709–748

    Article  Google Scholar 

  • World Bank (2020) World Bank. World Dev. Indic. (http://databank.worldbank.org/data/reports.aspx?Source=World%20Development%20Indicators#).

  • Xu Y, Fan X, Zhang Z, Zhang R (2020) Trade liberalization and haze pollution: evidence from China. Ecol Indic 109:105825

    Article  CAS  Google Scholar 

  • Zhang C, Zhou X (2016) Does foreign direct investment lead to lower CO2 emissions? Evidence from a regional analysis in China. Renew Sust Energ Rev 58:943–951

    Article  Google Scholar 

  • Zhu H, Duan L, Guo Y, Yu K (2016) The effects of FDI, economic growth and energy consumption on carbon emissions in ASEAN-5: evidence from panel quantile regression. Econ Model 58:237–248

Download references

Availability of data and materials

The data used and/or analyzed during the current study are available from the corresponding author on reasonable request.

Author information

Authors and Affiliations

  1. Faculty of Economics and Administrative Sciences, Cyprus International University, North Cyprus, Via Mersin 10, Nicosia, Turkey

    Benjamin Ampomah Asiedu

Authors
  1. Benjamin Ampomah Asiedu
    View author publications

    You can also search for this author in PubMed Google Scholar

Contributions

BAA wrote the “Introduction” section and the methodology and analyzed and interpreted the data regarding FDI and environment. The author read and approved the final manuscript.

Corresponding author

Correspondence to Benjamin Ampomah Asiedu.

Ethics declarations

Ethics approval

Not applicable

Consent to participate

Not applicable

Consent for publication

Not applicable

Competing interests

The author declares no competing interests.

Additional information

Responsible Editor: Nicholas Apergis

Publisher’s note

Springer Nature remains neutral with regard to jurisdictional claims in published maps and institutional affiliations.

Appendix

Appendix

Table 9 List of countries
Full size table

Rights and permissions

Reprints and permissions

About this article

Check for updates. Verify currency and authenticity via CrossMark

Cite this article

Asiedu, B.A. Do international investment contribute to environmental pollution? Evidence from 20 African countries. Environ Sci Pollut Res 28, 41627–41637 (2021). https://doi.org/10.1007/s11356-021-14677-w

Download citation

  • Received:

  • Accepted:

  • Published:

  • Issue Date:

  • DOI: https://doi.org/10.1007/s11356-021-14677-w

Keywords

Search

Navigation